Economy

The Republican Deficit

This is a little wonky, but Bruce Bartlett makes a clear case against the price tag -- in terms of both deficit and debt -- of the Bush tax cuts, and how the Paul Ryan tax cuts will make things even worse.

[R]evenues were 20.6 percent of GDP in 2000 and 18.5 percent of GDP in 2007, at the peak of the business cycle before the recession reduced them to 14.9 percent of GDP, where they have been for the last two years. (The postwar average is about 18.5 percent of GDP.) Without the Bush tax cuts – and those added by Obama – revenues would likely be more like 17.5 percent of GDP, which is where they were at the trough of the last three recessions.

If revenues had been 2 percent of GDP higher over the last 10 years, the federal debt would be about $2.5 trillion smaller. Instead of having a debt of about 60 percent of GDP last year, it would have been about 44 percent. And that doesn’t take into account all the interest that would have been saved that now adds about $60 billion to the deficit annually. Together, higher revenues and lower interest spending would have reduced last year’s deficit by one-third.

In other words, if taxes had remained lower than average -- around 17 percent (or so) of GDP -- the deficit would be one third lower. 33 percent lower. That's around $400 billion, given the 2010 deficit of around $1.3 trillion.

By the way -- and I don't mind repeating this over and over -- the 2010 deficit was $122 billion lower than the 2009 deficit. The 2010 deficit was based on President Obama's first budget and the 2009 deficit was based on the last Bush budget. Suck on that, Republicans.